How to set up an efficient nearshore operation in Portugal

Nearshore is a form of outsourcing where companies transfer part of their operations to geographically close countries, typically within the same time zone or with minimal differences.

Many companies recognize that the quality of services provided by nearshore providers often exceeds what they can achieve in-house. For others, the decision is more cost-driven: operational expenses in their home country may be high, or they may lack the resources and infrastructure needed to develop and implement essential IT systems. Whatever the reason, outsourcing IT projects to Central Europe can be a strategic solution to enhance operational efficiency and increase profitability, combining lower costs with high-quality standards.

Portugal offers several advantages that make it an emerging hub for nearshore services in Europe:

• Strategic location: Time zone aligned with most European countries.
• Qualified talent: Skilled workforce fluent in English and other European languages.
• High quality of life: Portugal is known for its safety, pleasant climate, and excellent infrastructure, attracting professionals from around the world.
• Government incentives: Programs supporting technology and innovation, such as Startup Portugal.
• Competitive costs: Lower salaries than in other Western European countries, while maintaining a high standard of quality.

Qualified and Highly Specialized Talent

Portugal is recognized for the quality of its professionals in the technology sector. With a solid academic background, particularly from prominent technology universities (six of which are ranked among the top 500 in the world), Portuguese IT professionals have excellent adaptability and a practical approach to solving challenges.

Portugal maintained the 25th position in the IMD World Talent Ranking according to the 2024 report. This ranking, developed in partnership with the Porto Business School, highlights the most competitive economies in terms of talent among 67 countries, led by Switzerland, Singapore, and Luxembourg.

Portugal is the European country where the number of programmers has grown the most. The number of these professionals in Portugal increased by 16% in 2018, according to a report by venture capital firm Atómico, further reinforcing its position as a promising tech hub.

Strategic Location and Easy Access

Portugal is strategically located, providing easy access to important markets. The time zone shared with countries like Ireland and the United Kingdom facilitates real-time collaboration with global business centers. Proximity to key Western European countries like Germany, France, and the Netherlands is an important advantage for companies that require quick and frequent travel. Portugal also offers direct connections to major American cities like New York, Boston, and San Francisco, making the country a gateway to Europe for U.S.-based companies.

High-Quality Infrastructure

Portugal ranks among the European countries with the best technological and telecommunications infrastructure. According to the Global Competitiveness Index, the country holds a prominent position (19th out of 138 countries) in terms of the quality of its roads, telecommunications, and internet access.

With one of the fastest internet speeds in Europe and around 90% of the territory covered by fiber optics, companies can rely on a modern and trustworthy infrastructure for their operations.

Excellent Level of English

Proficiency in English is one of the most common skills among Portuguese professionals. In fact, Portugal is one of the countries with the highest English proficiency in the world.

This means that companies will have no difficulty finding professionals with solid language skills. Creating a nearshore team in Portugal ensures that international teams can communicate fluently and effectively, without language barriers.

Social and Political Stability

Portugal is one of the most peaceful countries in the world, ranking 6th in the Global Peace Index. This social and political stability is a decisive factor for international companies, as it offers a secure and predictable environment for business.

In recent years, Portugal’s economy has shown sustainable growth, with the Gross Domestic Product (GDP) constantly recovering and a significant improvement in the labor market.

Competitive Office and Workspace Costs

In addition to offering qualified talent at competitive prices, Portugal also stands out for the affordable cost of office spaces. Renting offices in cities like Lisbon and Porto is significantly cheaper compared to other European capitals.

For companies that prefer more flexible solutions, there is a wide variety of modern and well-equipped coworking spaces available in various cities.

Collaborative and Welcoming Work Culture

The Portuguese are known for their open-mindedness and cultural adaptability. They work well in teams, value a sense of community, and have a collaborative approach to achieving results.

The work culture in Portugal is characterized by a collective spirit, where collaboration and mutual support are encouraged. This cultural trait creates a harmonious and productive work environment, making Portuguese teams highly integrated and focused on common goals.

Define Objectives and Expectations

Before starting, be clear about what you want to achieve with the nearshore operation: cost reduction, project acceleration, access to specialized talent?

Choose the Operating Model

There are different ways to structure the nearshore operation:

• Own Development Center: Full control over the team and projects.
• Partnership with Local Companies: Quick access to talent and established infrastructure.
• Hybrid Model: A combination of both approaches.

Select the Right Partner

Evaluate the experience, technical capability, and reputation of local suppliers. Make visits and ask for references before making a decision.

• Legal and Tax Compliance
  Work with specialists to ensure your operation complies with labor laws, tax regulations, and data protection laws in Portugal.
• Team Integration and Management
  Invest in clear communication, regular visits, and the creation of a culture of collaboration between your local teams and nearshore teams.

Common Challenges

• Cultural differences and varying expectations may impact communication and productivity.
• Growing competition for tech talent makes hiring more challenging.
• Remote management can be difficult without clear processes.

Practical Solutions

• Promote cultural integration programs and continuous training.
• Offer competitive benefits packages to attract and retain top talent.
• Utilize digital collaboration tools and establish structured, regular communication.

Farfetch: Founded in Portugal, now one of the world’s largest luxury fashion platforms, combining local and international operations.

Talkdesk: A Portuguese cloud-based contact center solutions company that quickly became a global tech leader with a hybrid development strategy.

Growing Market Opportunities

• Sectors like fintech, healthtech, and cybersecurity are experiencing rapid growth in Portugal, creating a vibrant ecosystem for tech companies.

Setting up a nearshore operation in Portugal can be a strategic decision for companies looking to grow sustainably and innovatively.

With the right planning, solid partnerships, and an integration-focused approach, nearshoring in Portugal offers a promising path for expansion and success.